Parliament debated the petition ‘Scrap plans forcing self employed & small business to do 4 tax returns yearly’ on Monday.
See the ‘Digital by 2020’ page at the top for developments to this and other aspects of digitalisation.
Tax returns and the digital age
You may have read that during the Autumn Statement a plan was announced to require all self-employed taxpayers to make four income tax returns per year by 2020.
My immediate reaction was that this, in the very scant detail it was mentioned, would not be positive. I welcome genuine tax simplification, whether to rules or processes, but I couldn’t immediately see how this would simplify anything. And this is such a big change that I would have preferred a public consultation period before any decision.
Having signed a petition to ask for reconsideration of this this move to be debated in Parliament, I have received today a message that it is scheduled for debate on 25 January.
The January date does not make it a convenient time for anyone working in personal tax to stay up to the minute with developments! There may be some press reports during the days following. But I shall post again with a summary during February. Depending on what unfolds, I shall also consider writing to the Government, outlining the potential impact on current clients and my own personal tax work.
Digital accounts and future of tax returns
More details are gradually becoming available as to how HMRC’s new ‘digital accounts’ will work.
It is planned that every taxpaying individual and business will have online access to their own HMRC ‘account’ showing all the tax(es) they pay and enabling them to see real-time information on their tax. Information will be accessed by HMRC from banking records, PAYE records and some other sources, such as businesses’ accounting packages. This is aimed at removing the need for an annual tax return. Other benefits will include facilities to do more online, removing some of the current need for paper forms.
This move will happen between 2016 and 2020.
The majority of my clients have self-employed businesses but do not use accounting software packages to keep their business records, instead using spreadsheets, Word documents or handwritten records. For those wishing to continue as they are, it has been indicated:
-That taxpayers will be able to authorise a tax adviser to manage their digital account on their behalf if they wish
-That those who wish to continue filing an annual return will be able to do so (and at present it seems to me this would be necessary for most of my clients, unless they wished to make a move to using accounting software)
For the time being, I plan to be offering a similar service to clients, but most likely with authorised access to the new, fuller online information which clients themselves will also be able to see.
Anyone receiving a letter from HMRC concerning the new digital service/Your Tax Account/the tax ‘dashboard’, please let me know and I’d be grateful to see a copy of this.
Summer Budget 2015
The ’emergency’ Budget overall looks to me to be a tax-raising budget. In particular, some currently receiving tax credits will be hit, as well as those letting out investment properties. However from April 2017, the raised tax-free personal allowance and 40% tax threshold may help some of my clients currently near or just into 40% tax.
A number of changes announced promise to be quite complex in how they operate and I shall post more having considered these. I shall be interested in particular to look at
-When is a house a home (for inheritance tax purposes)
-How to count children (for the allowances cap above two children)
-Exactly where ‘the North’ starts (I am on a train to Newcastle shortly, so shall be looking out for the Powerhouse on the way)
Budget 2015: an end to tax returns?
The prospect of no longer needing to submit a yearly income tax return is appealing!
A few taxpayers with very straightforward tax affairs will, it seems, come out of the Self Assessment system entirely with no need to make returns. For most others, the obligation to provide information to HMRC and pay tax will be unchanged, but the method and timing may alter from 2017 onwards with the use of an online HMRC account. So these online exchanges with HMRC will still be ‘tax returns’ of a sort (information passed to HMRC on which basis tax is paid). The current, annual return will remain as an option for those who prefer this.
Meanwhile for the self-employed, Class 2 national insurance, currently being merged with Class 4 for collection, is finally to go. The timing has yet to be announced.
I shall be interested to find out, and update clients, on how the new ‘tax returns’ will work, particularly for self-employed taxpayers. In general, though, any move which simplifies what is currently such an overcomplicated system has to be worthwhile.
Payment of income tax due 31 January
I recommend using BillPay with a debit card at https://www.santanderbillpayment.co.uk/hmrc/scripts/help3.asp.
It’s instant, although the confirmation email can take 2-3 days.
If not using BillPay, it’s now too late for BACS if your bank takes three working days for transfers. If your bank does FPS same-day payments, that’s OK, otherwise you’ll need to ask for a same-day CHAPS payment to be set up.
https://www.gov.uk/pay-self-assessment-tax-bill/bank-details shows the relevant accounts. HMRC suggest using Cumbernauld details if in doubt as to whether to pay to Cumbernauld or Shipley – in practice it seems that either is fine. For any electronic payment you will need your 10-digit tax reference.
